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Citigroup’s Jim Suva today offers an upbeat, contrarian view of the personal computer market, writing that unit shipment growth may return in the next few years, rather than expectations for a decline.

After an onslaught on of tablets, everyone jumped on the “PC is dead” theme, writes Suva: “With PC units declining by a record 10% in 2013, investors and industry analysts were quick to dismiss the PC as dead, many predicting the market to perpetually decline by double digits as we enter the ‘post-PC era’.”

“Not so fast,” writes Suva: the PC is never going to return to double-digit growth, but he sees it being just flat this year, rising 1% in 2016, and then 2% in 2017, versus consensus expectations for a 2% decline the next two years.

Basically, some of the reasons for decline, such as Apple‘s (AAPL) iPad, are moderating. At the same time, the modest rebound in sales that was attributed to companies buying machines before Microsoft‘s (MSFT) Windows XP went out of support, was not the whole story, so people have underestimated the staying power of the PC longer-term, he thinks.

Enterprises are generally returning to buying PCs after a hiatus, he writes:

Fast forward a year, the pessimism has certainly moderated as PCs are set to decline by only 2-3% in 2014. That said, this market is still by and large viewed as a secular decliner with most estimates looking for market contraction for the next 2-3 years (IDC at 1-2% decline through 2017). At this point, the key reason why investors are still skeptical on any growth in PCs near-term is the notion that 2014 demand was artificially buoyed by a rush to replace PCs running Windows XP—which Microsoft officially ended support in April, and with no such catalysts in 2015, the market will continue to decline or maybe worsen given difficult comps. Although we admit that this will be a modest headwind for growth in 2015, the potential impact will likely be much smaller than investors believe. Although we fully acknowledge that the PC market is beyond the period of growing 8-12%, our analysis indicates that this market has the potential to grow low-single digits, at least for the next 2-3 years [...] Corporate PCs in emerging markets (EM) will start to grow again given an aging installed base and steady employment growth; cannibalization from tablets has diminished significantly; and the headwind following the recent demand uplift from Windows XP expiration will be modest. We detail our analysis in the following section.

In particular, emerging markets went on a spending spree before 2011. Combined with slowing macroeconomic trends, that binge last decade led to extended lifetimes in which companies in emerging markets held onto PCs:

Our analysis indicates that the annual 7% decline in commercial PCs in EM (27% of total PCs) since 2011 can be entirely blamed on the aging of the PC installed base. We estimate that the PC replacement cycle stretched almost 1.5 years during that period to currently above 4.5 years. To put this into context, this is worse than the 1 year increase we witnessed in the US — which happened during the depth of the recent recession (2Q08-1Q09). We believe this aging of the EM corporate PC installed base can be attributed to two factors: 1) following a spending spree on PCs during much of the last decade, we believe the average age of a EM corporate PC had contracted to 3.3 years by 2011, well below the normal 3.8. In other words, there were more new PCs in the workforce than necessary; and 2) a deteriorating macro and IT spending.

Rob Sanderson of MKM PartnersstartedFacebook (FB) at a Buy rating with a $105 price target, writing that video ads is the next big area for growth as traditional online ad spend growth cools for the company in coming years.

Palo Alto’s “WildFire” product, for example, is picking up pace in sales, “which we believe presents a competitive risk to FireEye.”

“In our view, FEYE’s premium pricing limits its available market to relatively high-end customers, which could limit the company’s growth.”

Maxim Group’s Kevin Rippey initiated coverage of TubeMogul (TUBE), the provider of advertising buying tools, with a Buy rating, and a $22 price target, writing that it is ”among the best positioned players in the broader programmatic/ ad tech sector given focus on digital video and a differentiated business model with clear operating leverage.”

TubeMogul shares are up 38 cents, or 2.2%, at $17.67.

Ratings changes

Sterne Agee’s Vijay Rakeshcut his rating on memory chip maker Spansion (CODE) to Neutral from Buy, following the company’s announcement Tuesday it will merge with programmable chip maker Cypress Semiconductor (CY) in an all-stock deal that valued Spansion at just under $26. Spansion are now above $30, and above Rakesh’s price target of $26.

Rakesh thinks it unlikely a competing bid will materialize. He notes that Microchip Technology (MCHP), a likely other bidder, “presented at a recent industry conference post the CY merger announcement and we did not see any indication of interest in the current events.”

Jefferies & Co.’s Atul Goyal cut his rating on shares of Nintendo (7974JP) to Underperform from Hold, writing that a recent rise in the shares above ¥14,000 puts the stock out of its established trading range and “here the downside risks outweigh upside” because “its revenues and profits face structural and cyclical declines.”

Nintendo stock rose ¥205 to ¥14,185 in Tokyo trading before the report came out.

In downgrades and upgrades, Merill Lynch’s Justin Post cut his rating on Google (GOOGL) to Neutral from Buy, and raised Yahoo! (YHOO) to Buy from Neutral. According to write-ups by MarketWatch, Post thinks Google’s ad franchise is threatened by Facebook and others, while Android is threatened by iPhone and Apple’s (AAPL) Apple Watch. Yahoo!, by contrast, has taken him by surprise with its willingness to seek ways to minimize the tax burden on its remaining stake in Alibaba Group Holding (BABA).

Earnings recap

Shares of fiber optics component maker Finisar (FNSR) are up 40 cents, or 2.4%,at $17.40, reversing losses in last night’s extended session, after the company yesterday afternoon missed fiscal Q2 expectations and forecast this quarter lower as well.

The stock got two downgrades today, from Stifel Nicolaus’s Patrick Newton, cutting his rating to Hold from Buy, and from Needham & Co.’s Alex Henderson, cutting his rating to Buy from Strong Buy.

Henderson writes the problems with telecom spending on equipment, and “lumpiness” of corporate networking, could “turn on a dime,” though ” it will likely be the July quarter when the business starts to turn around.”

Another one from yesterday, video chip maker Ambarella (AMBA), which sells into GoPro (GPRO) cameras, are down 97 cents, or 1.7%, at $54.66, despite beating fiscal Q3 expectations, and also forecasting this quarter’s results comfortably ahead. There were two downgrades, that I can see, to Sell from Neutral at Chardan and to Neutral from Buy at Dougherty & Co., but there are also numerous price target increases.

Dougherty’s Charles Anderson writes that a 23.5 times multiple of his new 2016 estimate for $1.92 in EPS only justifies a $51 price target, despite the health of the business.

Arista sued

Shares of Arista Networks (ANET) are down $3.91, or 5%, at $69.63, after Cisco Systems (CSCO) filed suit against the company in the backyard of both, Federal District Court for the Northern District of California, for what general counsel Mark Chandler of Cisco alleges is “deliberate inclusion in its products of 12 discrete and important Cisco features covered by 14 different U.S. patents,” with both a patent infringement lawsuit and a copyright infringement suit.

Jefferies & Co.’s Mark Lipacis reiterated a Buy rating on Intel (INTC) shares, writing that the chip giant’s deal to create wearable tech with eyeglass titan Luxottica, and the prospect that it may be included in the next version of Google Glass, suggest its “extending manufacturing lead will translate to lower-power/lower cost MPUs that take share in tablets and mobile devices.”

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.